Revised Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)
Chapter 4 - Provisional tax uplift factor
Overview
4.1 The amendments in Schedule 6 to the Bill make a technical change to the section in the Income Tax Assessment Act 1936 (ITAA 1936) which prescribes the method of calculation of the provisional tax uplift factor. They take account of changes in the presentation of the National accounts published by the Australian Bureau of Statistics (ABS) which took effect for the September 1998 quarter.
Summary of the amendments
4.2 The purpose of the amendments is to enable the provisional tax uplift factor to be calculated by reference to the measure of gross domestic product (GDP) which is currently calculated and published by the ABS.
4.3 The amendments will apply to provisional tax payable for the 1999-2000 income year and later income years.
Background to the legislation
4.4 The provisional tax payable by a taxpayer is calculated using the provisional tax uplift factor as calculated under section 221YAAA of ITAA 1936. Currently, this uplift factor is determined by reference to the change in one of a number of gross domestic product measures formerly published by the ABS ie. GDP(I).
4.5 However, with effect for the September 1998 quarter, the ABS ceased to calculate and publish a separate GDP(I) measure. It now calculates and publishes gross domestic product as a single measure ie. GDP. As a result, the provisional tax uplift factor can no longer be calculated using the existing legislation.
Explanation of the amendments
4.6 The amendments will:
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- remove the specific reference in subsection 221YAAA(4) of ITAA 1936 to GDP(I); and
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- substitute a reference to the new measure of gross domestic product calculated and published by the ABS ie. GDP.
4.7 The GDP figures used to calculate the provisional tax uplift factor for the 1999-2000 income year were published by the ABS on 3 March 1999. Using these figures and the proposed amended formula, the provisional tax uplift factor for 1999-2000 income year will be 6%.
4.8 If the provisional tax uplift factor were to be calculated by reference to a derived series analogous to the previously published GDP(I), the result would also be an uplift factor of 6%. Therefore, the proposed amendments have no negative effect on either the revenue or taxpayers for the 1999-2000 income year.
4.9 The amendment applies for the purpose of working out amounts of provisional tax payable for the 1999-2000 income year and all later income years [Schedule 6, Item 2] .